Predator Oil Regulatory News (PRD)

FOR IMMEDIATE RELEASE

20 September 2022

Predator Oil & Gas Holdings Plc / Index: LSE / Epic: PRD / Sector: Oil & Gas

Predator Oil & Gas Holdings Plc

("Predator" or the "Company" and together with its subsidiaries "the Group")

Report and Interim Financial Statements for the 6 months to 30 June 2022

Financial highlights:

· Loss from operations for the 6 months period is £599,789 (2021: full year Loss of £1,398,821).

· Cash balance, at period end of £1,549,434 (2021 year end: £1,523,035).

· A further £1,235,107 (US$1,500,000) held as restricted cash and £654,073 by way of a loan to FRAM Exploration Trinidad Ltd. for the investment in the Pilot CO2 EOR Project.

· £1,035,000 (before expenses) raised through one Placing.

· 8,855,486 share options issued exercisable at £0.0566.

· No debt.

Operational highlights:

· Geological desk-top studies for MOU-1 confirm potential for unconsolidated sandstone reservoirs. 

· MOU-1 perforating programme revised to include new shallow gas interval.

· Potential for biogenic in addition to thermogenic gas established.

· Integration of MOU-1 drilling results with post-well seismic mapping defines the "Moulouya Fan" covering over 30km².

· MOU-2 drilling location finalised.

· Environmental Impact Assessment for up to three new well locations received regulatory approval.

· Exclusivity over surplus liquid CO2 supply in Trinidad maintained until 2023.

· Discussions advanced with Trinidadian operator for an investment in the CO2 EOR business.

· Mag Mell Floating Storage and Regassification Project ("FSRU") for the import of LNG from non-fracked gas presented at Ireland's National Energy Summit and in the form of a "White Paper" for circulation within the Irish Government as a contribution to the security of energy supply debate.

· Directorate changes resulted in Dr. Stephen Staley (Chairman) and Mr. Louis Castro stepping down from

the Board and Mr. Tom Evans and Mr. Alistar Jury being appointed as Non-executive directors. Mr. Paul Griffiths moved to Executive Chairman and Mr. Lonny Baumgardner to Managing Director.

Post reporting date:

· On the 12 July 2022, Novum Securities Limited ("Novum") exercised the 24 May 2018 (which had the expiry date extended to 24 May 2023) and 17 February 2020 warrants issued by the Company, whereby by the Company have allotted and issued a total of 4,149,210 new ordinary shares following the receipt of £143,253 relating to the subscription price.

· On the 17 August 2022 £3,300,000 (before expenses) raised through one Placing with the issue of 60,0000 Ordinary Shares of 5.5 pence each. 15 million existing shares along with voting rights were loaned to the Company by a director Paul Griffiths under a Stock Lending Agreement. The Company did not have sufficient headroom to enable the issue and admission of all of the 60,000,000 Placing Shares which are required to be issued pursuant to the Placing without the production of an FCA approved prospectus. The Stock Lending Agreement ensured that the Company is fully funded for its near-term Moroccan drilling programme and can meet its proposed drilling schedule.

· In connection with the fundraising, 3,600,000 warrants, exercisable at 5.5p per new ordinary share with a 3 year expiry from Admission were issued to Novum Securities Limited or their nominees.

· MOU-2 drilling programme progressed through the placing of orders for long-lead well inventory and surveying of the drilling location.

· Preliminary MOU-2 drilling prognosis completed for well planning purposes.

· Potential for up to 168 metres of gross reservoir section identified at the MOU-2 drilling location.

Predator Oil & Gas Holdings Plc (PRD), the Jersey-based Oil and Gas Company ("Predator" or "the Company") focussed on near-term, high impact drilling for gas in Morocco is pleased to announce its unaudited interim results for the six-month period ended 30 June 2022.

 Executive Chairman's Report

Dear Shareholder,

The first six months of 2022 has continued to be a busy period for the Company as we concentrate the vast majority of our resources on the high impact drilling for gas in Morocco to extend the MOU-1 gas structure that we successfully established in 2021 with our first-ever operated well in Morocco.

2022 thus far has been dominated by the ramifications of the Ukraine -Russia crisis which, in addition to the indefensible and devastating humanitarian impact, has created an Energy Crisis of epic proportions not seen ever before. As a result, reduction in CO2 emissions to address climate change concerns have suffered a set-back as several economies return to burning carbon-intensive fuels such as coal and oil as gas supply is reduced and/or re-directed through infrastructure location and capacity that was never intended for its current purpose.

The security of gas supplies has been highlighted for many years yet, due to failure to recognise the importance of an Energy Transition focussed on "greener gas" and investing in infrastructure, gas storage and the development of secure indigenous gas and LNG entry points to provide diversity of supply at times of high winter demand, policy makers and governments have erroneously chosen to treat gas as another "dirty" fossil fuel and obstruct investment in the natural gas business. Whilst this has achieved short-term political advantage in addressing climate change concerns it has created a previously unimaginable cost of living crisis which will negatively impact hundreds of millions of people. Let's make no mistake this is not due to the Ukraine-Russia crisis but rather had its origins in a poor, ill-informed understanding of the requirement for gas as the fuel of choice for the Energy Transition to allow time for the roll-out of renewables to totally fulfil the seasonal demand for energy and for unplanned shocks created by global market forces and geopolitics.

Through its long-established activities the Company is well positioned to help contribute to ameliorating the near-term impact of the Energy Crisis in Morocco and Ireland.

In Morocco we have matured our plans for drilling MOU-2 to appraise the Moulouya Fan, the distal edge of which was penetrated by MOU-1 in 2021. Timing of drilling is coincidental with the sharp rise in European wholesale gas prices. The option to develop Compressed Natural Gas ("CNG") is ideally suited to the scattered nature of the Moroccan industrial gas market, which lends itself to deliveries by truck rather than fixed gas pipelines. Low development costs, high gas prices and low taxation combined with potentially large gas resources in the Moulouya Fan has the potential to accelerate "First Gas" and to provide a sustainable and secure indigenous source of gas. This will create excellent profit margins whilst maintaining an affordable price for industry that allows Moroccan industrial products to compete in the export market represented by the European Union, where energy costs have risen dramatically.

The Company decided to maintain control of its operations in Morocco by not farming out before the drilling of MOU-2 and funding its proposed drilling operations itself. Farming out would have delayed the timing of drilling operations and would have resulted in a disproportionate loss of potential shareholder value as potential farminees used funding the well as leverage to secure better commercial terms for themselves.

Ireland has been left particularly exposed by the developing Energy Crisis. The country has no gas storage facilities; declining indigenous gas production with a ban on new licences for gas exploration; no LNG import terminal; and a reliance on one source of imported gas through interconnectors with the United Kingdom. For security of gas supply Ireland is now reliant on the generosity of the United Kingdom Government placing it alongside the requirements of its own population in an emergency where shortages of winter gas may occur.

During the six months to date the Company has promoted its options to address security of gas supply in Ireland by presenting and sponsoring the National Energy Summit and through the issue of a "White Paper" on the FSRUP LNG import option of non-fracked gas ("Mag Mell Project") which has been circulated to Government Coalition Ministers, Gas Networks Ireland, EirGrid and the Commission for the Regulation of Utilities amongst others at national and local level. The Minister for the Department of the Environment, Climate and Communications ("DECC") has acknowledged receipt of the Mag Mell Project. Government Policy relates to the import of fracked gas and does not mention non-fracked gas.

The Company has satisfied all requirements to advance the development of its Corrib South and Ram Head assets offshore Ireland, which include an undeveloped gas field, discovered gas and a potential gas storage facility, to demonstrate that there are no reasons why the successor authorisations cannot be awarded now.

Furthermore, the Mag Mell Project has been shown to be a viable LNG import option that could be delivered in the near-term to alleviate security of gas supply by using the existing Kinsale gas pipeline to shore. The Company is liaising with Hoegh LNG on technical solutions for Mag Mell and its downstream gas buyer to better understand potential seasonal market volumes. It would be an act of reckless ideological vandalism to decommission the Kinsale pipeline to shore at this time of national energy emergency. The Company continues to progress the regulatory process to advance the Mag Mell Project through a cautious deployment of minimal cash resources and personnel time. The Company takes the view that the DECC criteria and rationale for delaying these projects any further is fundamentally flawed and, in some cases, based on misinformation. As a result of the potential consequences of this the Company will clearly maintain its visibility in Ireland to be in a position to take advantage of any action other operators may or may not consider.

In Trinidad, the Company has focussed on seeking a local in-country operator for an investment in its CO2 EOR expertise and know-how. We are still the only company in Trinidad capable of initiating CO2 EOR projects at this time. There is a recognition that well productivity can be increased in mature onshore oil fields by injecting CO2, as was the case for the Inniss-Trinity Pilot CO2 EOR Project. The burden however of operating in Trinidad needs to be shared with a local company to ensure an alignment of commercial interests.

We await the publication of FRAM Exploration Trinidad Ltd.'s parent company 2021 Audited Accounts to provide further due diligence input into the background to the parent company's rationale for prematurely terminating the Inniss-Trinity Pilot CO2 EOR Project. The comments of their auditors in respect of how this event is described and treated in the published audited accounts for 2021 will be extremely helpful.

Operational overview

Morocco

Following an assessment of the 2021 MOU-1 drilling results SLR Consulting (Ireland) Ltd. ("SLR") provided a new Competent Persons Report ("CPR"). The CPR comprises of an independent re-assessment and valuation of the "Guercif MOU-4 Prospect" which is now designated the Moulouya Fan. The distal edge of the Moulouya Fan was penetrated by MOU-1 and now the proposed MOU-2 well will test the core area of the fan where a gross reservoir section of up to 168 metres is potentially developed.

The gross Best Estimate resources, based on a conservative 66% gas recovery over 13 years, is 393 BCF (295 BCF net attributable to Predator's 75% interest). SLR indicate a High Estimate of 708 BCF net attributable to Predator's 75% interest based on a higher GIIP estimate for thicker reservoirs potentially to be encountered at the MOU-2 well location.

The CPR has moved the pre-drill Prospective Resources to Contingent Resources and defines the Best Estimate of 295 BCF net to the Company's 75% interest to be "potentially recoverable from a known accumulation by the application of a development project".

The definition of Contingent Resources has resulted in an ENPV of US$148 million based on 25% of the 295 BCF (74 BCF) of the net resources attributable to the Company's 75% interest. The 25% chance of proceeding to development reflects the remaining production, transport, legal, contractual and environmental issues relating to a large-scale gas-to-power development. Unrisked ENPV is US$592 million. The CPR states that "the chance of commerciality for a pilot Compressed Natural Gas ("CNG") development supplying lower volumes of gas to industrial markets is likely to be considerably higher", based on a higher reported average gas price to the Moroccan industry of US$11.40/mcf in 2021.

Post-MOU-1 geological studies have now been completed. These have helped calibrate and understand better the conventional wireline logs acquired at the time of drilling MOU-1, which were influenced by poor borehole conditions, and the NuTech higher resolution petrophysical logs interpreted at a later date. The potential for excellent reservoir quality in thinly laminated, unconsolidated sands has been recognised. A previously over-looked shallow section in MOU-1 has been interpreted as probably gas-bearing and will now be included in the MOU-1 perforating and testing programme.

Geochemical analysis of MOU-1 well cuttings have established a thermogenic gas source but also a potential additional biogenic gas source.

Post-well evaluation of the MOU-1 data has been important for re-evaluating the MOU-1 drilling programme to revise the drilling mud system to be used for MOU-2 to minimise the effect on unconsolidated sands and reduce the impact of high mud weights to control higher than anticipated formation pressures. Potentially these are related to the presence of a significant gas column in over-pressured reservoirs. 

Integrating the desk top studies with the MOU-1 well results has created a high degree of confidence in delineating the extent of the Moulouya Fan over an area of at least 30km². As a result, the combination of the gas flow rates to be potentially confirmed by the MOU-1 testing programme and a possible MOU-2 testing programme should be sufficient to initiate a pilot CNG development to supply gas by road to the Moroccan industrial centres.

Ireland

During the period under review the Company has mainly focussed on raising the public and Irish Government's awareness of the Mag Mell FSRUP LNG gas import option. This was to demonstrate how Mag Mell could address Ireland's security of gas supply.

The Company presented its alternative gas import option at the National Energy Summit in Dublin in April 2022. A "White Paper" was issued and circulated to politicians and all significant stakeholders in the energy sector in Ireland. It demonstrated how gas was needed to seasonally support the national electricity grid when renewable energy was curtailed by weather conditions. This was followed up by lobbying members of the Irish Dail in a series of one-to-one meetings.

No further responses have been received from the DECC regarding the Company's applications for successor authorisations for Corrib South and Ram Head. The Company has satisfied all regulatory requirements for the award of the successor authorisations.

The Company continues to make submissions to the DECC to delay the decommissioning of the Kinsale gas pipeline to shore. Currently the Minister for the DECC has not signed off on the decommissioning of this vital piece of gas infrastructure, which if decommissioned would further weaken Ireland's security of energy supply. The Company's proposed Ram Head gas storage facility would be dependent upon the Kinsale gas pipeline to shore remaining in place to advance the date for the commissioning of such a storage facility. Ireland has no gas storage facility and is clearly not contributing at present to the wider energy security of the European Union despite having the infrastructure and facilities to help with ameliorating the Energy Crisis.

Trinidad

During the period under review the Company has focussed on collecting and analysing data for a mature onshore producing oil field and an undeveloped oil field with a view to assessing their suitability for CO2 EOR operations.

A commercial proposal has been submitted to one local operator for CO2 EOR operations in one of their fields involving an investment into the Company's CO2 EOR business.

Separately, the Company has made a proposal to the Ministry of Energy and Energy Industries ("MEEI") to develop miscible CO2 EOR if awarded a production licence over an undeveloped oil field. It is likely that this particular asset will be the subject of a Bid Round in 2023. The Company will be well-placed to succeed in the Bid Round as CO2 EOR forms an important consideration for future agreed work programmes with the MEEI. The preference is to joint venture with a local in-country operator to apply in a 2023 Bid Round.

The Company's strategy in Trinidad is to defer any potential participation in new projects until after the Moroccan drilling programme has been successfully completed and the wells tested to establish potential gas flow rates. At that time, the Company will have numerous options to further develop its business supported by potential near-term cash flow from a pilot CNG development. One particularly attractive opportunity has been identified in Trinidad and may be pursued through the MEEI if it becomes available after the completion of Moroccan drilling.

Financial review

The Company reported an operating loss for the period to 30 June 2022 of £599,789 (£758,128 for the period to 30 June 2021). The decrease in operating loss is mostly attributable to a positive foreign exchange movement for the period to 30 June 2022 which was £243,530 (loss on foreign exchange rate of £61,826 for the period to 30 June 2021).

Administrative expenses for the period to 30 June 2022 also included £131,297 (£86,730 for the period to 30 June 2021) fair value adjustment to warrants and share options.

The Company is finishing the reporting period with cash reserves of £1,549,434 (£1,523,035 for the period to 30 June 2021) and restricted cash of £1,235,107 (£1,083,298 for the period ended 30 June 2021) in the form of the security deposit for the Guercif Bank Guarantee in favour of ONHYM. The balance outstanding of the loan by the Company to FRAM for the investment in the Pilot CO2 EOR Project was £654,073 (£487,477 for the period to 30 June 2021) at the end of the period to 30 June 2022.

During the period to 30 June 2022, we have completed one Placing to raise £1,035,000 (before expenses). As a result of these transactions 11,500,000 new shares have been issued and the issued share capital increased to 304,446,267 by the end of the period to 30 June 2022. Also, during the period, the Company received an exercise notice from Novum in respect of warrants whereby Novum was exercising the warrants issued on 24 May 2018 (which had the expiry date extended to 24 May 2023) and 17 February 2020. On the 12 July 2022, following this notice, the Company allotted and issued the total of 4,149,210 New Ordinary Shares following receipt of the aggregate £143,253 subscription price from Novum.

Placing funds were to provide the working capital to fully fund the Company's well planning operations in Morocco.

As a result of the transactions successfully concluded during the period under review, the Company is well-capitalised, free of debt and is in a position to deploy prudent levels of administrative expenditure focussed on enhancing and promoting the potential of the Company's portfolio.

COVID pandemic and Energy Crisis

The Company took all commensurate steps during the period under review to minimise unnecessary capital expenditures and operating costs in the event that COVID restrictions might be re-imposed at some future date. The Energy Crisis is impacting the industry's business operations worldwide as a result of rising inflation and rising costs in respect of well services and well inventory. The Company's management has managed this situation through continuing to apply negotiating skills to reduce costs and by eliminating unnecessary expenditures.

Maintaining adequate cash reserves and delivering a high impact drilling programme in Morocco focussed on the opportunity to supply gas to the Moroccan industrial market is a prudent risk-reward proposition for our shareholders. Reducing expenditures in the short-term in Trinidad and Ireland is also prudent in order to focus resources on delivering this key value proposition in Morocco for shareholders. This does not reduce the Company's strategic and competitive advantages in Trinidad for CO2 EOR operations, where exclusivity of liquid surplus CO2 supply has been maintained, nor Ireland, where the Company currently offers a viable gas storage project and a FSRU LNG gas import option. Continuing with demonstrating the capability of delivering CO2 sequestration using CO2 EOR technology in Trinidad is an important contribution to helping to reduce CO2 emissions during the Energy Transition. These strategic objectives are allowing the Company to demonstrate to potential partners and investors its ability to perform and create exciting business development opportunities compatible with the requirements for an effective Energy Transition. This is even more important to demonstrate now during the onset of the Energy Crisis and the realisation of the practical requirement for a planned Energy Transition.

Summary

During the period under review, the Company has successfully achieved key well planning progress in Morocco within our strict budget guidelines to maintain the ability to drill a high value drilling target for gas in 2022.

De-risking the gas potential of the Guercif Basin in 2021 after 35 years without drilling activity, has set up a timely opportunity in the context of the Energy Crisis to appraise, develop and deliver gas to the Moroccan industrial gas market on very favourable commercial terms and with manageable capital requirements for a Company with our current market capitalisation. Partnering with downstream off-takers of gas is a sensible solution to reducing our financial requirements for developing and scaling up our proposed CNG business model. The overriding objective of the Company in 2022 is to deliver the MOU-2 drilling programme and the perforating and testing of MOU-1 and MOU-2. Successful gas flow rates at even a modest level from both wells would be sufficient to initiate a pilot CNG project with the potential to deliver operating revenues within 12 months of project inception.

In Trinidad we are firmly established as the country's only CO2 EOR services provider following the technical and operational success of the Inniss-Trinity pilot CO2 EOR project and the important lessons that have been learnt. The establishment by the Government of Trinidad and Tobago of the Steering Committee for Carbon Capture and CO2 EOR supports our efforts to partner with indigenous, well-financed, onshore producers to provide ESG support and credentials through CO2 sequestration and to provide secondary recovery technology, expertise, and experience to increase profits from mature fields. Our services will need to be funded by the producers either with profit sharing arrangements or, preferably, through a direct investment in our CO2 EOR business.

In Ireland we have an environmentally aware technical and commercial solution to Ireland's lack of security and diversity of gas supply. Regulators are aware of what the Mag Mell FSRU project has to offer Ireland. Sentiment is being forced to adapt to the realities of the Energy Crisis, spiralling energy costs and the seasonal volatility in energy markets. The requirement for gas in Ireland is a necessity for years to come and the Company is well-positioned to seek partnerships with indigenous companies in the Irish energy sector where our assets, expertise and specific Irish offshore experience can be traded for a strong balance sheet that allows us to close out opportunities with multi-nationals to develop our niche strategic position in Ireland. This position has been nurtured through unfashionable times to a point where the "Energy Crisis" makes gas fashionable again. There is however no guarantee that the current Minister for the DECC in Ireland will address the current Energy Crisis in a pragmatic way and in the public interest, preferring to make the case for greener renewable energy that currently and in the near-term cannot resolve the Energy Crisis.

During the period under review we have taken the opportunity, when possible and advisable to do so, to raise funds in the public markets. This is necessary for us to maintain our projects in good standing and to strengthen our hand in commercial negotiations with well services and well inventory suppliers and with potential end users of gas in Morocco. Our management is under-valued in the public markets based on what it has achieved with limited financial resources. We have three strategically important projects on three continents, managed by a small team of experienced professionals. Post period, on 14 September 2022 the Company was trading at a 190% premium to its original IPO share price despite COVID, Brexit, the Energy Crisis and financial market volatility and after investing prudently in value-creating projects and operations.

On behalf of the Board, I would like to thank our shareholders for their patience and continued support of the Company through what has been a turbulent period dominated by the emerging "Energy Crisis". We look forward over the next 6 months to continue to make positive progress in Morocco towards realising our objective of executing high impact/high value drilling for gas and early monetisation through an innovative pilot CNG development to supply gas to Morocco's industrial users.

Paul Griffiths

Executive Chairman

Paul Griffiths, Executive Chairman of Predator, commented:

"As we have predicted for several years, security of energy supply, particularly in relation to gas and its requirement for a smooth and fair "Energy Transition", has become a critical strategic issue for governments around the World as a consequence of the Ukraine-Russia crisis. We had therefore built our asset portfolio primarily based on "greener" gas in the knowledge that pragmatism and practical realisation of the role of gas in supporting the roll-out of renewable energy during the Energy Transition would eventually prevail. Therefore, it comes as no surprise to us that fossil fuels are back at the forefront of helping to address the Energy Crisis. What is disappointing is that many governments have turned back to carbon intensive fuels such as coal and oil because the investment in additional gas infrastructure and indigenous gas production was actively discouraged.

We are excited to be progressing drilling for more gas in Morocco to establish a near-term CNG development case. Revenue generation will create the opportunity to upscale our proposed CNG project with organically sourced funding from cash flow. The anticipated high profit margins will give us flexibility and a balance sheet to maintain our strategic presence in Ireland and Trinidad and to expand to acquire other gas assets where we may be able to add significant value by applying our same management philosophy that we have applied to date."

This announcement contains inside information for the purposes of Article 7 of the Regulation (EU) No 596/2014 on market abuse

For more information, please visit the Company's website at www.predatoroilandgas.com: 

Enquiries:

Notes to Editors:

Predator is operator of the Guercif Petroleum Agreement onshore Morocco which is prospective for Tertiary gas in prospects less than 10 kilometres from the Maghreb gas pipeline. The MOU-1 well has been completed and a follow-up testing programme is being finalised to coordinate with a further drilling programme beginning in 2022.

Predator is seeking to further develop the remaining oil reserves of Trinidad's mature onshore oil fields through the application of CO2 EOR techniques and by sequestrating anthropogenic carbon dioxide to produce "greener" oil.

In addition, Predator also owns and operates exploration and appraisal assets in licensing options offshore Ireland, for which successor authorisations have been applied for, adjoining Vermilion's Corrib gas field in the Slyne Basin on the Atlantic Margin and east of the decommissioned Kinsale gas field in the Celtic Sea.

Predator has developed a Floating Storage and Regasification Project ("FSRUP") for the import of LNG and its regassification for Ireland and is also developing gas storage concepts to address security of gas supply and volatility in gas prices during times of peak gas demand.

The Company has a highly experienced management team with a proven track record in operations in the oil and gas industry.

The interim management report and interim results are set out in the following pages.

The Directors present their report and the unaudited consolidated financial statements together with related notes, of Predator Oil & Gas Holdings Plc and its subsidiaries ("the Group") for the six months ended 30 June 2022. The statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at the year ended 31 December 2021. The results for the period ended 30 June 2022 are unaudited. These statements are in agreement with accounting records which have been properly kept in accordance with Article 103 of the Companies (Jersey) Law 1991.

Responsibility Statement

We confirm that to the best of our knowledge:

- The Interim Report has been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the EU and applicable law

- The condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.10

- The Interim Report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year and

- The Interim Report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being the information required on related party transactions.

The Interim Report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by

Executive Chairman

COVID statement, Energy Crisis and global outlook

The six-month period ended 30 June 2022, has seen a significant relaxation of COVID restrictions to the extent that they are no longer having the same impact on travel, restrictions on operations, commodity prices, financial markets and overall investment sentiment. We must however remain vigilant in the event that there is a further outbreak of COVID in the future. Businesses have learnt now how to adapt to any potential COVID restrictions in order to navigate through the challenges it poses.

The Energy Crisis has created new challenges in the form of rising demand for services and equipment from the fossil fuel industry after a period of COVID constrictions and down-sizing and in response to climate change concerns and the Ukraine-Russia crisis. This has led to acute cost inflation as the pool of services and equipment has contracted. Supply chain delays for key well equipment are to be expected as manufacturing output has been curtailed by the loss of steel-making plants in Russia, through sanctions, and in the Ukraine, through war and surplus inventory being used up. Maintenance of key equipment is likely to have been postponed and time will be required to make such equipment fully operational again.

Public awareness of climate change concerns and unsustainable accelerating levels of CO2 emissions is now fully developed. The fossil fuel industry has been the primary focus of attention during this time, given its high-profile current and historical contribution to generating CO2 emissions through use by, largely, third parties of its products. This has created a difficult environment for attracting equity and debt finance as banks and institutions react to pressure to disassociate themselves from fossil fuel investments. This has resulted in reduced investment in fossil fuel infrastructure, field development and exploration drilling (needed to replace declining reserves). However, the Energy Crisis created by the Ukraine-Russia tensions has changed this landscape in the near-term with the result that investor sentiment for the fossil fuel sector is returning as gas price rises dominate the energy market. The Company is protected as it may potentially become a near-term gas producer.

The Energy Transition has a key role to play in navigating the way to lowering of CO2 emissions by gas replacing coal and oil. The wind does not always blow, the sun does not always shine and large amounts of electricity cannot yet be stored! It is therefore inevitable that gas will be required for years to come as a back-up energy supply when renewables cannot meet the demand. The fossil fuel industry produces gas. The fossil fuel industry has the knowledge and expertise to develop indigenous gas resources, LNG import options, and the underground reservoirs for CO2 sequestration and gas storage. Investment should be focussed on these aspects of the industry to address the "Energy Crisis" and the Energy Transition.

The Energy Crisis has created volatility in the foreign exchange markets with notably a significant depreciation of the value of sterling versus the United States Dollar. The Company is required to minimise as far as possible its exposure to spending United States Dollars until revenues are established. This exposure will be unavoidable for the Moroccan drilling programme and the Company has allowed for this in its drilling and testing budgets.

Notes to the condensed consolidated interim financial statements

For the 6 months to 30 June 2022

General information

Predator Oil & Gas Holdings Plc ("the Company") and its subsidiaries (together "the Group") are engaged principally in the operation of an oil and gas development business in the Republic of Trinidad and Tobago and an exploration and appraisal portfolio in Morocco and Ireland. The Company's ordinary shares are on the Official List of the UK Listing Authority in the standard listing section of the London Stock Exchange.

Predator Oil & Gas Holdings plc was incorporated in 2017 as a public limited company under Companies (Jersey) Law 1991 with registered number 125419. It is domiciled and registered at IFC5, 3rd Floor, Castle Street, St Helier, Jersey, JE2 3BY.

Basis of preparation

The condensed consolidated interim financial statements are prepared under the historical cost convention and on a going concern basis and in accordance with International Financial Reporting Standards and IFRIC interpretations adopted for use in the United Kingdom ("IFRS").

The condensed consolidated interim financial statements contained in this document do not constitute statutory accounts under Companies (Jersey) Law 1991. In the opinion of the directors, the condensed consolidated interim financial statements for this period fairly presents the financial position, result of operations and cash flows for this period.

The condensed consolidated interim financial statements have not been audited, however, they have been reviewed by the Company's auditors in accordance with the International Standard on Review Engagements 2410 issued by the Auditing Practices Board.

Statutory financial statements for the year ended 31 December 2021 were approved by the Board of Directors on 28 June 2022. The report of the auditors on those financial statements was unqualified, however, it contained an emphasis of matter paragraph in respect of the recoverability of the loan receivable from FRAM (note 7) and the capitalisation of exploration costs.

The Board of Directors approved this Interim Financial Report on 20 September 2022. 

Statement of compliance

The Interim Report includes the consolidated interim financial statements which have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2021, which have been prepared in accordance with IFRS as adopted by the United Kingdom.

Going Concern

Notwithstanding the operating loss incurred during the period under review and following a successful placing to raise a total of £1,035,000 before expenses and a further successful placing post the reporting period to raise £3,300,000 before expenses, the Directors have a reasonable expectation that the Group will not need to raise funds to continue with its operational commitments and to meet all of its current contractual liabilities for the foreseeable future.

The planned major initiative for 2022 is the drilling of the MOU-2 well in Morocco. The costs for this well are currently based on the final MOU-1 well costs. Whilst the cost of well services and equipment has gone up and the United States Dollar has strengthened significantly against sterling this has been largely offset against savings made in the drilling programme based on the MOU-1 learning curve. Furthermore MOU-1 drilling costs included a large element of VAT that cannot now be recovered until production is established. Sufficient time exists prior to the execution of the MOU-2 drilling programme to ensure that all VAT exemption claims are processed before contracts are executed, unlike for MOU-1 where there was a very short lead time to mobilising the Start Valley Rig 101 from the Rharb Basin. A negotiation with ONHYM is to take place with respect to the timing of the return of US$1,000,000 of the US$1,500,000 Bank Guarantee versus entry into the First Exploration Period of the Guercif Petroleum Agreement.

The Company is planning a discretionary drilling programme in Guercif in 2022 which is subject to funding potentially at the project level via a farmin or other form of financial arrangement for project equity. If successful, the Company will enter the next phase of the Guercif Licence at which time the discretionary work programme completed in 2022 will contribute towards the work programme agreed for the next phase of the Guercif Licence and the Bank Guarantee may be rolled over too.

CO2 EOR in Trinidad has not required any additional working capital other than a small allotment of funds for care and maintenance. The Operator of the Inniss-Trinity Incremental Production Services Contract ("IPSC"), FRAM, unilaterally elected to terminate the Inniss-Trinity CO2 EOR Pilot Project without informing the licence holder Heritage Petroleum Trinidad Ltd. ("Heritage"). As a result, no further funds are being invested in the project and there are no residual liabilities to be incurred by the Company. The Well Participation Agreement ("WPA") with FRAM and all accrued entitlements due to the Company arising from the WPA up until the time the project was unilaterally terminated by FRAM's parent company currently remain due, as does the Loan advanced to FRAM, which is repayable from the profits of the sale of enhanced oil production. Negotiations with FRAM and its parent company to amicably find a solution to the situation based on the proposal submitted previously to the parent company by the Company did not elicit a response. Given the uncertain financial status of the parent company of FRAM, the Directors have made provisions in the Going Concern forecast that the Loan may never be recovered and no profits from enhanced oil production in Inniss-Trinity will be forthcoming. This provision was only reflected in the Going Concern forecast to ensure that the Company had sufficient resources to continue operating for the foreseeable future even on a worst-case scenario. It was decided by the Directors that the loan was not to be provided for until legal advice, which has been sought by the Company, has been reviewed following the publication of the parent company's 2021 Audited Accounts by 30th September 2022. At this time the preferred legal option to exercise may be implemented taking into account the parent company's auditors' description of the dispute with the Company and the ability of the parent company to pay any potential compensation claim.

For the Going Concern if there were to be a projected working capital shortfall within the next 12 months, then the directors will institute a programme of cuts to directors' and consultant's remuneration and other third-party corporate costs until such time as US$500,000 of the Guercif Bank Guarantee is returned after delivering to ONHYM the data from the seismic reprocessing and desk-top studies. This would be extended to include the return of the US$1,000,000 of the Guercif Bank Guarantee. If either or both of these events were delayed then the Directors would seek to raise additional funds in the equity markets, assuming that no farmout of project equity had occurred by such time as additional working capital was required.

The Company has no debt.

The Directors do not believe that either a resurgence of COVID or Brexit will adversely influence the Group's business development strategy. Operations in Morocco can be maintained if that were to occur based on the operating practices established for the drilling of MOU-1. Brexit will only create more uncertainty for Ireland's security of gas supply, thereby enhancing the Company's LNG import project for Ireland by creating an alternative source of gas not tied to the UK-Ireland gas transmission infrastructure.

Relaxation of COVID restrictions may create more opportunities for the Company to divest assets if required to do so as the appetite for gas assets and ESG credentials increases as a result of the "Energy Crisis" and investors' concerns regarding aligning investment with ESG credibility.

The directors having made do and careful enquiry, are of the opinion that the Group has adequate working capital to execute its operational commitments over the next 12 months given that current spending commitments will prevail. The Group will therefore continue to adopt the going concern basis in preparing the Interim Report and Financial Statements.

Cyclicality

The interim results for the six months ended 30 June 2022 are not necessarily indicative of the results to be expected for the full year ending 31 December 2022. Due to the nature of the entity, the operations are not affected by seasonal variations at this stage.

New Standards adopted at 1 January 2022

There are no accounting pronouncements which have become effective from 1 January 2022 that have a significant impact on the Group's interim condensed consolidated financial statements.

Significant accounting policies

The accounting policies applied by the Group in these half-yearly results are the same as those applied by the Group in its consolidated financial information in its 2021 Annual Report and Accounts.

Areas of estimates and judgement

When preparing the Group's consolidated interim financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

The judgements, estimates and assumptions applied in the Group's consolidated interim financial statements, including the key sources of estimation uncertainty, were the same as those applied in the Group's last annual financial statements for the year ended 31 December 2021.

Foreign currencies

The functional currency of the Group and all of its subsidiaries is the British Pound Sterling.

Transactions entered into by the Group entities in a currency other than the currency of the primary economic environment in which it operates (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the date of the statement of financial position. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation.

1 Financial risk management

The Board continually assesses and monitors the key risks of the business. The key risks that could affect the Group's medium-term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group's 2021 Annual Report and Financial Statements, a copy of which is available from the Group's website: www.predatoroilandgas.com. The key financial risks are market risk (including cash flow interest rate risk and foreign currency risk), credit risk and liquidity.

2 Segmental analysis

The Group operates in one business segment, the exploration, appraisal and development of oil and gas assets. The Group has interests in three geographical segments being Africa (Morocco), Europe (Ireland) and the Caribbean (Trinidad and Tobago).

The Group's operations are reviewed by the Board (which is considered to be the Chief Operating Decision Maker ('CODM')) and split between oil and gas exploration and development and administration and corporate costs.

Operating segments are disclosed below on the basis of the split between exploration and development and administration and corporate. 

There are no non-current assets held in the Group's country of domicile, being Jersey, Channel Islands (2021: £nil).

Diluted loss per Ordinary share equals basic loss per ordinary share as, due the losses incurred in 2022 and 2021, there is no dilutive effect from the subsisting share options.

All costs relating to Project Guercif have been capitalised and will be depreciated once gas discovery is declared commercial and a Plan of Development has been approved.

The Directors have undertaken an assessment of the following areas and circumstances that could indicate the existence of impairment:

· The Group's right to explore in an area has expired, or will expire in the near future without renewal;

· No further exploration or evaluation is planned or budgeted for;

· A decision has been taken by the Board to discontinue exploration and evaluation in an area due to the absence of a commercial level of reserves; or

· Sufficient data exists to indicate that the book value will not be fully recovered from future development and production.

The Company's subsidiary, Predator Gas Ventures Limited, on 19 March 2019, provided a bank guarantee of US$1.5 million to Office National des Hydrocarbures et des Mines, who act for the Moroccan State, as a condition of being granted the Guercif exploration licence. Predator Gas Ventures Limited was required to lodge a security deposit of US$1.5 million with Barclays Bank Plc to secure the guarantee facility. The restricted access cash balance of £1,235,107 represents the aforesaid security deposit and is denominated in US Dollars. These funds are refundable on the completion of the Minimum Work Programme set out in the terms of the Guercif Petroleum Agreement and Association Contract. All other receivables are denominated in Pound Sterling.

(i) As at the year ended 30 June 2022 £654,073 (2021: £487,477) comprises of:

• USD$360,096 (2021: USD360,096) advanced as cash in line with a loan agreement signed and dated 24 July 2019 and subsequent 5 addendums (2021: 5 addendums); and

• USD$402,120 and GBP26,461 (2021: USD402,120 GBP26,461) advanced as equipment.

The loans are in place to provide FRAM with funds for the purpose of meeting current and future expenses.

The loans balance are unsecured, interest free and repayable at the discretion of Predator Oil & Gas Trinidad Limited provided not less than a notice of 7 working days is given.

On the 7 June 2022, The Company announced an update on the Company's position with regard to the loan receivable (the "FRAM Loan") from FRAM Exploration Trinidad Ltd. ("FRAM"), a wholly owned subsidiary of Challenger Energy Group Plc ("Challenger"), in respect of the Inniss-Trinity CO2 EOR Project (the "CO2 EOR Project"). The CO2 EOR Project was prematurely and unilaterally terminated by Challenger on 1 August 2021.

In the absence of receiving a response to the Company's correspondence to Challenger dated 23 March 2022 and in the light of FRAM and Challenger refusal in writing to comply with a request for information from the Company via its auditors that was necessary for its financial reporting of the FRAM Loan, the Company has elected to initiate a litigation process.

The scope of the litigation process involves the Company seeking recompense in relation to the following matters:

1. The FRAM Loan outstanding to the Company of £591,065 as of 31 December 2021.

2. The Company is seeking full repayment of its project costs (the "Project Costs") invested in the CO2 EOR Project under the terms of the Inniss-Trinity Well Participation Agreement (the "WPA"), which remains in place.

3. The Company is seeking substantial consequential losses from Challenger under the WPA and arising from Challenger's failure to facilitate the execution of Phase 3 of the CO2 EOR Project as defined in the approved Inniss-Trinity CO2 EOR Project Proposal PRD25092019.

Based on an average WTI spot price of US$100, the Company is attributing an undiscounted value to the potential 853,000 barrels of oil resources in the AT-4 Block to have potentially been developed under Phase 3 of the CO2 EOR Project of US$30/barrel. The Company therefore determines that the potential claim for estimated consequential losses against Challenger, based on 50% of net profits under the WPA, could be up to US$12,800,000 but may be revised upwards depending on forward oil price projections.

4. Phase 4 of the approved Inniss-Trinity CO2 EOR Project Proposal PRD25092019 allows for the application of the CO2 EOR Pilot learnings to be applied within new areas of the Inniss-Trinity field for upscaling CO2 EOR.

The SLR Consulting Ireland Ltd Independent Competent Persons Report for the Inniss-Trinity field published 19 February 2020 gives Best Estimate recoverable CO2 EOR resources for the entire Inniss-Trinity field of 6.8 million barrels.

Based on 50% of net profits under the WPA and US$30/barrel this would amount potentially to estimated undiscounted consequential losses of up to US$102 million but may be revised upwards depending on forward oil price projections.

The Company notes the Challenger RNS dated 8 June 2022 but does not accept its conclusions. The Company will not elaborate further at this time so as not to prejudice any future legal process

Pending the outcome of commercial negotiations to settle the dispute with FRAM the aforesaid loan may or may not be recovered.

11 Share based payments

Share options

The Group operates a share option plan for directors. During the period the below share options were issued:

On 31 January 2022 both Lonny Baumgardner and Louis Castro were granted share options of 7,855,486 and 1,000,000, respectively. The share options granted were exercisable at 5.66p each being the closing mid-marked price on 28 January 2022 and had a vesting period of 6 months ending 31 July 2022.

For the six months ended 30 June 2022, the Group has recognised £131,297 of share-based payment expense in the statement of profit or loss (2021: £62,364).

Warrants

During the period, the Company did not grant any warrants (2021: 1,620,000).

13 Financial instruments

The Group's financial instruments comprise cash and items arising directly from its operations such as trade receivables and trade payables.

14 Related party transactions

Transactions with key management personnel

Key management of the Group are the board of directors. Key management personnel remuneration includes the following expenses:

Four Directors at the end of the period have share options receivable under long term incentive schemes. The highest paid Director received an amount of £107,350 (2021: £116,667). All individuals are engaged as service providers.

15 Subsequent events

On the 12 July 2022, the Company received an exercise notice from Novum Securities Limited ("Novum") in respect of warrants issued to it pursuant to warrant agreements with the Company:

· Dated 24 May 2018 (which had the expiry date extended to 24 May 2023) (in connection with the Placing carried out by the Company in May 2018 on admission of the Company to the Official List (standard listing segment) of the London Stock Exchange's main market for listed securities) to subscribe for 1,892,960 new shares of no par value each in the Company ("New Ordinary Shares") at 2.8p per share, and

· Dated 17 February 2020 (in connection with the Placing carried out by the Company in February 2020) to subscribe for 2,256,250 new shares of no par value each in the Company ("New Ordinary Shares") at 4p per share.

The Company has therefore allotted and issued the total of 4,149,210 New Ordinary Shares following receipt of the aggregate £143,253 subscription price from Novum

· On the 17 August 2022 £3,300,000 (before expenses) raised through one Placing with the issue of 60,0000 Ordinary Shares of 5.5 pence each. 15 million existing shares along with voting rights were loaned to the Company by a director Paul Griffiths under a Stock Lending Agreement. The Company did not have sufficient headroom to enable the issue and admission of all of the 60,000,000 Placing Shares which are required to be issued pursuant to the Placing without the production of an FCA approved prospectus. The Stock Lending Agreement ensured that the Company is fully funded for its near-term Moroccan drilling programme and can meet its proposed drilling schedule.

· In connection with the fundraising, 3,600,000 warrants, exercisable at 5.5p per new ordinary share with a 3 year expiry from Admission were issued to Novum Securities Limited or their nominees.

As at 31 July 2022, the share options issued to Lonny Baumgardner and Louis Castro on 31 January 2022 have vested.

16 Ultimate controlling party

In the opinion of the Directors there is no ultimate controlling party as no one individual is deemed to satisfy this definition.

17 Restatement of prior period

During the preparation of the financial statements for the year ended 31 December 2021, it was decided by the Directors that the Company was to restate the warrant issue costs shown in prior periods.

The restatement was implemented to bring prior years' warrant costs to be aligned with IFRS 2 in the oil and gas industry, whereby any warrants issued for services provided, are to be fully recognised with the equity section of the Company.

The impact on the prior interim financial statements is shown on the table below: